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Sales - Dimayuga - Part 1 Cases PDF
Sales - Dimayuga - Part 1 Cases PDF
house and lot, covered by TCT No. 119627 of the Registry of Deeds of
Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our
deceased father, Constancio P. Coronel, the transfer certificate of title
immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said property and
Miss Ramona Patricia Alcaraz shall immediately pay the balance of
the P1,190,000.00.
DECISION
MELO, J.:
1.
Ramona will make a down payment of Fifty Thousand
(P50,000.00) pesos upon execution of the document aforestated;
2.
The Coronels will cause the transfer in their names of the title of
the property registered in the name of their deceased father upon
receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3.
Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of Ramona
and the latter will pay the former the whole balance of One Million
One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
Alcaraz (hereinafter referred to as Concepcion), mother of Ramona,
paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh.
B, Exh. 2).
On February 6, 1985, the property originally registered in the name of
the Coronels father was transferred in their names under TCT No.
327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT
No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter
referred to as Catalina) for One Million Five Hundred Eighty
Thousand (P1,580,000.00) Pesos after the latter has paid Three
Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
`Page 1 of 113
For this reason, Coronels canceled and rescinded the contract (Exh.
A) with Ramona by depositing the down payment paid
by Concepcion in the bankin trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a
specific performance against the Coronels and caused the annotation
of a notice of lis pendens at the back of TCT No. 327403 (Exh. E;
Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse
claim covering the same property with the Registry of Deeds of
Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over
the subject property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in
the name of Catalina under TCT No. 351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83,
RTC, Quezon City) the parties agreed to submit the case for decision
solely on the basis of documentary exhibits. Thus, plaintiffs therein
(now private respondents) proffered their documentary evidence
accordingly marked as Exhibits A through J, inclusive of their
corresponding submarkings. Adopting these same exhibits as their
own, then defendants (now petitioners) accordingly offered and
marked them as Exhibits 1 through 10, likewise inclusive of their
corresponding submarkings. Upon motion of the parties, the trial
court gave them thirty (30) days within which to simultaneously
submit their respective memoranda, and an additional 15 days within
which to submit their corresponding comment or reply thereto, after
which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over
Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment
was handed down by Judge Roura from his regular bench at
Macabebe, Pampanga for the Quezon City branch, disposing as
follows:
Hence, the instant petition which was filed on March 5, 1992. The last
pleading, private respondents Reply Memorandum, was filed
onSeptember 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary
inhibition of the Justice to whom the case was last assigned.
c)
already agreed to sell the subject property, they undertook to have the
certificate of title change to their names and immediately thereafter, to
execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and
conditions, promised to sell the property to the latter. What may be
perceived from the respective undertakings of the parties to the
contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer
ownership of the subject house and lot to the buyer if the documents
were then in order. It just so happened, however, that the transfer
certificate of title was then still in the name of their father. It was
more expedient to first effect the change in the certificate of title so as
to bear their names. That is why they undertook to cause the issuance
of a new transfer of the certificate of title in their names upon receipt
of the down payment in the amount of P50,000.00. As soon as the
new certificate of title is issued in their names, petitioners were
committed to immediately execute the deed of absolute sale. Only
then will the obligation of the buyer to pay the remainder of the
purchase price arise.
There is no doubt that unlike in a contract to sell which is most
commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installment by withholding ownership
over the property until the buyer effects full payment therefor, in the
contract entered into in the case at bar, the sellers were the ones who
were unable to enter into a contract of absolute sale by reason of the
fact that the certificate of title to the property was still in the name of
their father. It was the sellers in this case who, as it were, had the
impediment which prevented, so to speak, the execution of an
contract of absolute sale.
What is clearly established by the plain language of the subject
document is that when the said Receipt of Down Payment was
prepared and signed by petitioners Romulo A. Coronel, et. al., the
parties had agreed to a conditional contract of sale, consummation of
which is subject only to the successful transfer of the certificate of title
(Rollo, p. 16)
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time
of fulfillment or occurrence of the suspensive condition on February
6, 1985. As of that point in time, reciprocal obligations of both seller
and buyer arose.
took when they entered into the agreement with private respondent
Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be denied
or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject
property at the time of sale, petitioners cannot claim now that they
were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected
contract of sale between them and Ramona P. Alcaraz, the latter
breach her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America,
without leaving her address, telephone number, and Special Power of
Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for
which reason, so petitioners conclude, they were correct in
unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of
the contract of sale in the instant case. We note that these supposed
grounds for petitioners rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules,
are deemed controverted even if no reply is filed by the plaintiffs (Sec.
11, Rule 6, Revised Rules of Court). The records are absolutely bereft
of any supporting evidence to substantiate petitioners
allegations. We have stressed time and again that allegations must be
proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882
[1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not
an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United
States of America on February 6, 1985, we cannot justify petitionerssellers act of unilaterally and extrajudicially rescinding the contract of
sale, there being no express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158
SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
There is thus neither factual nor legal basis to rescind the contract of
sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner,
Catalina B. Mabanag, gave rise to a case of double sale where Article
1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry
of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof to the person who presents the oldest title, provided
there is good faith.
The record of the case shows that the Deed of Absolute Sale dated
April 25, 1985 as proof of the second contract of sale was registered
with the Registry of Deeds of Quezon City giving rise to the issuance
of a new certificate of title in the name of Catalina B. Mabanag on June
5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership
to pass to the buyer, the exceptions being: (a) when the second buyer,
in good faith, registers the sale ahead of the first buyer, and (b) should
there be no inscription by either of the two buyers, when the second
buyer, in good faith, acquires possession of the property ahead of the
first buyer. Unless, the second buyer satisfies these requirements, title
or ownership will not transfer to him to the prejudice of the first
buyer.
In his commentaries on the Civil Code, an accepted authority on the
subject, now a distinguished member of the Court, Justice Jose C.
Vitug, explains:
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyers rights except when the second buyer
first registers in good faith the second sale (Olivares vs. Gonzales, 159
SCRA 33). Conversely, knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also Astorga vs.
Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that
it is essential, to merit the protection of Art. 1544, second paragraph,
that the second realty buyer must act in good faith in registering his
deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99,
Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition,
p. 604).
Petitioners point out that the notice of lis pendens in the case at bar
was annotated on the title of the subject property only on February 22,
1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on
February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title,
she was unaware of any adverse claim or previous sale, for which
reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not
whether or not the second buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag
could not have in good faith, registered the sale entered into on
February 18, 1985 because as early as February 22, 1985, a notice of lis
pendens had been annotated on the transfer certificate of title in the
names of petitioners, whereas petitioner Mabanag registered the said
sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been
previously sold to private respondents, or, at least, she was charged
with knowledge that a previous buyer is claiming title to the same
`Page 9 of 113
`Page 10 of 113
SECOND DIVISION
[G.R. No. 120747. September 21, 2000]
VICENTE GOMEZ, as successor-in-interest of awardee LUISA
GOMEZ, petitioner, vs. COURT OF APPEALS, City of MANILA
acting thru the City Tenants Security Committee now the Urban
Settlement Office, Register of Deeds of Manila, respondents.
DECISION
BUENA, J.:
Sought to be reversed in this petition for review on certiorari under
Rule 45 of the Rules of Court is the decision[1] of the Court of Appeals
in C.A. G.R. Sp. No. 32101 promulgated on 22 February 1995 which
annulled and set aside the decision of the Regional Trial Court of
Manila, Branch 12 in Civil Case No. 51930.
Impugned similarly is the resolution[2] of the Court of Appeals dated
29 June 1995 denying petitioners motion for reconsideration.
From the records, we find the following antecedents:
Pursuant to the Land for the Landless Program of the City of Manila
and in accordance with City Ordinance No. 6880, the Office of City
Mayor issued Resolution No. 16-A,[3] Series of 1978, dated 17 May
1978, which effectively set guidelines and criteria for the award of city
home lots to qualified and deserving applicants. Attached to said
resolution and made as integral part thereof was a Contract to Sell[4]
that further laid down terms and conditions which the lot awardee
must comply with.
On 30 June 1978, the City of Manila, through the City Tenants
Security Committee (CTSC) presently known as the Urban Settlement
Office (URBAN), passed Resolution 17-78[5] which in effect awarded
to 46 applicants, 37 homelots in the former Ampil-Gorospe estate
located in Tondo, Manila. Luisa Gomez, predecessor-in-interest of
herein petitioner Vicente Gomez, was awarded Lot 4, Block 1, subject
to the provisions of Resolution No. 3-78 of the CTSC and building,
subdivision and zoning rules and regulations.
Title shall pass to the vendee upon execution of a final deed of sale in
his/her favor. X X X
Par. (8). In order not to defeat the purpose of this social land reform
program of the City of Manila, and to prevent real estate speculations
within twenty years from complete payment of the purchase price
and execution of the final deed of sale, the lot and residential house or
improvement thereon shall not be sold, transferred, mortgaged,
leased or otherwise alienated or encumbered without the written
consent of the City Mayor.
Par. (9). During the effectivity of this agreement, the residential
house or improvement thereon shall not be leased, sold, transferred or
otherwise alienated by the vendee without the written consent of the
owner. X X X
Par. (14). In the event that the vendee dies before full payment of the
purchase price of the lot, his/her surviving spouse, children heirs
and/or successors-in-interest shall succeed in all his/her rights and
interest, as well as assume all/his/her obligations under this
agreement.
Par. (15). This agreement shall be binding upon the heirs, executors
and administrators of the vendee. (emphasis ours)
Petitioner urges that awardee Luisa Gomez did not commit any
violation of the lot award. On the contrary, the records would
indubitably show that Luisa Gomez, including her heirs and
successors-in-interest, have performed acts that constitute gross, if not
brazen, violation of the aforementioned terms and conditions of the
`Page 15 of 113
heirs nevertheless abandoned their right when they violated the terms
and conditions of the award by donating the subject property to
petitioner Vicente Gomez.
As paragraph (15) of the agreement provides that the heirs of the
vendee shall be bound thereby, it is then incumbent upon said heirs to
render strict compliance with the provisions thereof.
In particular, paragraph (8) of the Contract proscribes the sale,
transfer, mortgage, lease, alienation or encumbrance of the lot,
residential house, or improvement thereon, without the written
consent of the City Mayor, within a period of twenty (20) years from
complete payment of the purchase price and execution of the final
deed of sale. The execution of the Deed of Donation by the surviving
children of Luisa Gomez on February 1, 1989, in favor of Vicente
Gomez, was clearly within the prohibited period of 20 years from the
full payment of the purchase price on January 18, 1980.
Without doubt, the prohibition applies to them.
Furthermore, the subject lot and residential house were occupied by,
and leased to, third persons, in crystalline and evident derogation of
the terms of the award.
WHEREFORE, premises considered, the instant petition is
DISMISSED for lack of merit, and the assailed decision of the Court of
Appeals with respect to the cancellation of the award of Lot 4, Block 1,
is AFFIRMED SUBJECT TO MODIFICATION as to the forfeiture of
amounts paid by the vendee.
As modified, the City of Manila, is hereby ordered to refund with
dispatch the amount of P8,244.00 representing the overpayment made
by petitioner plus interest.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ.,
concur.
`Page 17 of 113
xxx
xxx
WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land
and the VENDOR has accepted the offer, subject to the terms and
conditions hereinafter stipulated:
NOW, THEREFORE, for and in consideration of the sum of ONE
MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX
HUNDRED PESOS (P1,561,600.00) ONLY, Philippine Currency,
payable by VENDEE to in to (sic) manner set forth, the VENDOR
agrees to sell to the VENDEE, their heirs, successors, administrators,
executors, assign, all her rights, titles and interest in and to the
property mentioned in the FIRST WHEREAS CLAUSE, subject to the
following terms and conditions:
1.
That the sum of FIFTY THOUSAND PESOS (P50,000.00)
ONLY Philippine Currency, is to be paid upon signing and execution
of this instrument.
2.
The balance of the purchase price in the amount of ONE
MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED
`Page 18 of 113
ENRIQUETA
Vendor
CHUA
VDA.
DE
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz 1
Alfonso Flores, in behalf of private respondent, forthwith received
and acknowledged a check for P50,000.00 2 from petitioner. 3
Pursuant to the agreement, private respondent filed a complaint for
ejectment (Civil Case No. 7579) against Melchor Musa and 29 other
squatter families with the Metropolitan Trial Court of Paraaque. A
few months later, or on 21 February 1989, judgment was rendered
ordering the defendants to vacate the premises. The decision was
handed down beyond the 60-day period (expiring 09 August 1988)
stipulated in the contract. The writ of execution of the judgment was
issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent sought to return
the P50,000.00 she received from petitioner since, she said, she could
not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol,
counsel for petitioner, in his reply of 17 April 1989, refused the tender
and stated:.
Our client believes that with the exercise of reasonable diligence
considering the favorable decision rendered by the Court and the writ
of execution issued pursuant thereto, it is now possible to eject the
squatters from the premises of the subject property, for which reason,
he proposes that he shall take it upon himself to eject the squatters,
provided, that expenses which shall be incurred by reason thereof
shall be chargeable to the purchase price of the land. 4
Meanwhile, the Presidential Commission for the Urban Poor
("PCUD"), through its Regional Director for Luzon, Farley O. Viloria,
asked the Metropolitan Trial Court of Paraaque for a grace period of
45 days from 21 April 1989 within which to relocate and transfer the
squatter families. Acting favorably on the request, the court
suspended the enforcement of the writ of execution accordingly.
On 08 June 1989, Atty. Apostol reminded private respondent on the
expiry of the 45-day grace period and his client's willingness to
`Page 19 of 113
From the moment the contract is perfected, the parties are bound not
only to the fulfillment of what has been expressly stipulated but also
to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. Under the agreement, private
respondent is obligated to evict the squatters on the property. The
ejectment of the squatters is a condition the operative act of which sets
into motion the period of compliance by petitioner of his own
obligation, i.e., to pay the balance of the purchase price. Private
respondent's failure "to remove the squatters from the property"
within the stipulated period gives petitioner the right to either refuse
to proceed with the agreement or waive that condition in consonance
with Article 1545 of the Civil Code. 16 This option clearly belongs to
petitioner and not to private respondent.
We share the opinion of the appellate court that the undertaking
required of private respondent does not constitute a "potestative
condition dependent solely on his will" that might, otherwise, be void
in accordance with Article 1182 of the Civil Code 17 but a "mixed"
condition "dependent not on the will of the vendor alone but also of
third persons like the squatters and government agencies and
personnel concerned." 18 We must hasten to add, however, that
where the so-called "potestative condition" is imposed not on the birth
of the obligation but on its fulfillment, only the obligation is avoided,
leaving unaffected the obligation itself. 19
In contracts of sale particularly, Article 1545 of the Civil Code,
aforementioned, allows the obligee to choose between proceeding
with the agreement or waiving the performance of the condition. It is
this provision which is the pertinent rule in the case at bench. Here,
evidently, petitioner has waived the performance of the condition
imposed on private respondent to free the property from squatters. 20
THIRD DIVISION
[G.R. No. 108346. July 11, 2001]
Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE,
petitioners, vs. COURT OF APPEALS, DAVID A. RAYMUNDO and
GEORGE RAYMUNDO, respondents.
DECISION
PANGANIBAN, J.:
A substantial breach of a reciprocal obligation, like failure to pay the
price in the manner prescribed by the contract, entitles the injured
party to rescind the obligation. Rescission abrogates the contract from
its inception and requires a mutual restitution of benefits received.
The Case
Before us is a Petition for Review on Certiorari[1] questioning the
Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 32991
dated October 9, 1992, as well as its Resolution[3] dated December 29,
1992 denying petitioners motion for reconsideration.[4]
The dispositive portion of the assailed Decision reads:
WHEREFORE, the Order dated May 15, 1991 is hereby ANNULLED
and SET ASIDE and the Decision dated November 14, 1990
dismissing the [C]omplaint is REINSTATED. The bonds posted by
plaintiffs-appellees
and
defendants-appellants
are
hereby
RELEASED.[5]
The Facts
The factual antecedents of the case, as found by the CA, are as
follows:
x x x. David Raymundo [herein private respondent] is the absolute
and registered owner of a parcel of land, together with the house and
xxx
xxx
xxx
xxx
`Page 24 of 113
2. That, in the event I violate any of the terms and conditions of the
said Deed of Real Estate Mortgage, I hereby agree that my
downpayment of P800,000.00, plus all payments made with the Bank
of the Philippine Islands on the mortgage loan, shall be forfeited in
favor of Mr. David A. Raymundo, as and by way of liquidated
damages, without necessity of notice or any judicial declaration to
that effect, and Mr. David A Raymundo shall resume total and
complete ownership and possession of the property sold by way of
Deed of Sale with Assumption of Mortgage, and the same shall be
deemed automatically cancelled and be of no further force or effect, in
the same manner as if (the) same had never been executed or entered
into.
3. That I am executing this Undertaking for purposes of binding
myself, my heirs, successors and assigns, to strictly and faithfully
comply with the terms and conditions of the mortgage obligations
with the Bank of the Philippine Islands, and the covenants,
stipulations and provisions of this Undertaking.
That, David A. Raymundo, the vendor of the property mentioned
and identified above, [does] hereby confirm and agree to the
undertakings of the Vendee pertinent to the assumption of the
mortgage obligations by the Vendee with the Bank of the Philippine
Islands. (Exh. C, pp. 13-14, Record).
This undertaking was signed by Avelina and Mariano Velarde and
David Raymundo.
It appears that the negotiated terms for the payment of the balance of
P1.8 million was from the proceeds of a loan that plaintiffs were to
secure from a bank with defendants help. Defendants had a standing
approved credit line with the Bank of the Philippine Islands (BPI).
The parties agreed to avail of this, subject to BPIs approval of an
application for assumption of mortgage by plaintiffs. Pending BPIs
`Page 25 of 113
First Issue:
Breach of Contract
Petitioners aver that their nonpayment of private respondents
mortgage obligation did not constitute a breach of contract,
considering that their request to assume the obligation had been
disapproved by the mortgagee bank. Accordingly, payment of the
monthly amortizations ceased to be their obligation and, instead, it
devolved upon private respondents again.
However, petitioners did not merely stop paying the mortgage
obligations; they also failed to pay the balance of the purchase price.
As admitted by both parties, their agreement mandated that
petitioners should pay the purchase price balance of P1.8 million to
private respondents in case the request to assume the mortgage
would be disapproved.
Thus, on December 15, 1986, when
petitioners received notice of the banks disapproval of their
application to assume respondents mortgage, they should have paid
the balance of the P1.8 million loan.
Instead of doing so, petitioners sent a letter to private respondents
offering to make such payment only upon the fulfillment of certain
conditions not originally agreed upon in the contract of sale. Such
conditional offer to pay cannot take the place of actual payment as
would discharge the obligation of a buyer under a contract of sale.
pay the balance of the sale price. They had no right to demand
preconditions to the fulfillment of their obligation, which had become
due.
WHEREFORE, the assailed Decision is hereby AFFIRMED with the
MODIFICATION that private respondents are ordered to return to
petitioners the amount of P874,150, which the latter paid as a
consequence of the rescinded contract, with legal interest thereon
from January 8, 1987, the date of rescission. No pronouncement as to
costs.
SO ORDERED.
Melo, (Chairman), Vitug, and Sandoval-Gutierrez, JJ., concur.
Gonzaga-Reyes, J., on leave.
Third Issue
Attempt to Novate
In view of the foregoing discussion, the Court finds it no longer
necessary to discuss the third issue raised by petitioners. Suffice it to
say that the three conditions appearing on the January 7, 1987 letter of
petitioners to private respondents were not part of the original
contract. By that time, it was already incumbent upon the former to
`Page 30 of 113
December 7, 1995
PADILLA, J.:
This is a petition for review on certiorari of the decision 1 of the Court
of Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the
decision 2 of the Regional Trial Court of Himamaylan, Negros
Occidental holding that private respondent Edy de los Reyes had
acquired ownership of Lot No. 1130 of the Cadastral Survey of
Hinigaran, Negros Occidental based on a document entitled
"Declaration of Heirship and Waiver of Rights", and ordering the
dispossession of petitioner as leasehold tenant of the land for failure
to pay rentals.
The facts of the case are as follows:
The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros
Occidental was evidenced by OCT No. R-12179. The lot has an area of
13,720 sq. meters. The title was issued and is registered in the name of
spouses Santiago Vasquez and Lorenza Oruma. After both spouses
died, their only son Felixberto inherited the lot. In 1975, Felixberto
executed a duly notarized document entitled "Declaration of Heirship
and Deed of Absolute Sale" in favor of Cosme Pido.
The evidence before the court a quo established that since 1960,
petitioner Teodoro Acap had been the tenant of a portion of the said
land, covering an area of nine thousand five hundred (9,500) meters.
When ownership was transferred in 1975 by Felixberto to Cosme
Pido, Acap continued to be the registered tenant thereof and
religiously paid his leasehold rentals to Pido and thereafter, upon
Pido's death, to his widow Laurenciana.
The controversy began when Pido died intestate and on 27 November
1981, his surviving heirs executed a notarized document denominated
as "Declaration of Heirship and Waiver of Rights of Lot No. 1130
Hinigaran Cadastre," wherein they declared; to quote its pertinent
portions, that:
. . . Cosme Pido died in the Municipality of Hinigaran, Negros
Occidental, he died intestate and without any known debts and
obligations which the said parcel of land is (sic) held liable.
That Cosme Pido was survived by his/her legitimate heirs, namely:
LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR
all surnamed PIDO; children;
That invoking the provision of Section 1, Rule 74 of the Rules of
Court, the above-mentioned heirs do hereby declare unto [sic]
ourselves the only heirs of the late Cosme Pido and that we hereby
adjudicate unto ourselves the above-mentioned parcel of land in
equal shares.
Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and
ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our
rights, interests and participation over the said parcel of land in favor
of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA
`Page 31 of 113
refused and failed to pay the agreed annual rental of ten (10) cavans
of palay despite repeated demands.
During the trial before the court a quo, petitioner reiterated his refusal
to recognize private respondent's ownership over the subject land. He
averred that he continues to recognize Cosme Pido as the owner of
the said land, and having been a registered tenant therein since 1960,
he never reneged on his rental obligations. When Pido died, he
continued to pay rentals to Pido's widow. When the latter left for
abroad, she instructed him to stay in the landholding and to pay the
accumulated rentals upon her demand or return from abroad.
It will be noted that at the time of Cosme Pido's death, title to the
property continued to be registered in the name of the Vasquez
spouses. Upon obtaining the Declaration of Heirship with Waiver of
Rights in his favor, private respondent Edy de los Reyes filed the
same with the Registry of Deeds as part of a notice of an adverse
claim against the original certificate of title.
Thereafter, private respondent sought for petitioner (Acap) to
personally inform him that he (Edy) had become the new owner of
the land and that the lease rentals thereon should be paid to him.
Private respondent further alleged that he and petitioner entered into
an oral lease agreement wherein petitioner agreed to pay ten (10)
cavans of palay per annum as lease rental. In 1982, petitioner
allegedly complied with said obligation. In 1983, however, petitioner
refused to pay any further lease rentals on the land, prompting
private respondent to seek the assistance of the then Ministry of
Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR
invited petitioner to a conference scheduled on 13 October 1983.
Petitioner did not attend the conference but sent his wife instead to
the conference. During the meeting, an officer of the Ministry
informed Acap's wife about private respondent's ownership of the
said land but she stated that she and her husband (Teodoro) did not
recognize private respondent's claim of ownership over the land.
On 28 April 1988, after the lapse of four (4) years, private respondent
filed a complaint for recovery of possession and damages against
petitioner, alleging in the main that as his leasehold tenant, petitioner
2.
Ordering the defendant Teodoro Acap to deliver possession of
said farm to plaintiff, and;
3.
Ordering the defendant to pay P5,000.00 as attorney's fees, the
sum of P1,000.00 as expenses of litigation and the amount of
P10,000.00 as actual damages. 5
In arriving at the above-mentioned judgment, the trial court stated
that the evidence had established that the subject land was "sold" by
the heirs of Cosme Pido to private respondent. This is clear from the
following disquisitions contained in the trial court's six (6) page
decision:
There is no doubt that defendant is a registered tenant of Cosme Pido.
However, when the latter died their tenancy relations changed since
ownership of said land was passed on to his heirs who, by executing a
Deed of Sale, which defendant admitted in his affidavit, likewise
passed on their ownership of Lot 1130 to herein plaintiff (private
respondent). As owner hereof, plaintiff has the right to demand
payment of rental and the tenant is obligated to pay rentals due from
the time demand is made. . . . 6
xxx
xxx
xxx
Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff
does not of itself extinguish the relationship. There was only a change
of the personality of the lessor in the person of herein plaintiff Edy de
los Reyes who being the purchaser or transferee, assumes the rights
and obligations of the former landowner to the tenant Teodoro Acap,
herein defendant. 7
`Page 34 of 113
SECOND DIVISION
[G.R. No. 126444. December 4, 1998]
ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA
QUIJADA, DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO
QUIJADA, and WARLITO QUIJADA, petitioners, vs. COURT OF
APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN,
ALBERTO ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO
ABISO, FERNANDO BAUTISTA, ANTONIO MACASERO, and
NESTOR MAGUINSAY, respondents.
DECISION
MARTINEZ, J.:
Petitioners, as heirs of the late Trinidad Quijada, filed a complaint
against private respondents for quieting of title, recovery of
possession and ownership of parcels of land with claim for attorney's
fees and damages. The suit was premised on the following facts
found by the Court of Appeals, which is materially the same as that
found by the trial court:
"Plaintiffs-appellees (petitioners) are the children of the late Trinidad
Corvera Vda. de Quijada. Trinidad was one of the heirs of the late
Pedro Corvera and inherited from the latter the two-hectare parcel of
land subject of the case, situated in the barrio of San Agustin,
Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada
together with her sisters Leonila Corvera Vda. de Sequea and Paz
Corvera Cabiltes and brother Epapiadito Corvera executed a
conditional deed of donation (Exh. C) of the two-hectare parcel of
land subject of the case in favor of the Municipality of Talacogon, the
condition being that the parcel of land shall be used solely and
exclusively as part of the campus of the proposed provincial high
school in Talacogon. Apparently, Trinidad remained in possession of
the parcel of land despite the donation. On July 29, 1962, Trinidad
sold one (1) hectare of the subject parcel of land to defendantappellant Regalado Mondejar (Exh. 1). Subsequently, Trinidad
verbally sold the remaining one (1) hectare to defendant-appellant
(respondent) Regalado Mondejar without the benefit of a written
deed of sale and evidenced solely by receipts of payment. In 1980, the
heirs of Trinidad, who at that time was already dead, filed a
complaint for forcible entry (Exh. E) against defendant-appellant
(respondent) Regalado Mondejar, which complaint was, however,
dismissed for failure to prosecute (Exh. F). In 1987, the proposed
provincial high school having failed to materialize, the Sangguniang
Bayan of the municipality of Talacogon enacted a resolution reverting
the two (2) hectares of land donated back to the donors (Exh. D). In
the meantime, defendant-appellant (respondent) Regalado Mondejar
sold portions of the land to defendants-appellants (respondents)
Fernando Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden
(Exh. 7) and Ernesto Goloran (Exh. 8).
"On July 5, 1988, plaintiffs-appellees (petitioners) filed this action
against defendants-appellants (respondents).
In the complaint,
plaintiffs-appellees (petitioners) alleged that their deceased mother
never sold, conveyed, transferred or disposed of the property in
question to any person or entity much less to Regalado Mondejar save
the donation made to the Municipality of Talacogon in 1956; that at
the time of the alleged sale to Regalado Mondejar by Trinidad
Quijada, the land still belongs to the Municipality of Talacogon,
hence, the supposed sale is null and void.
"Defendants-appellants (respondents), on the other hand, in their
answer claimed that the land in dispute was sold to Regalado
Mondejar, the one (1) hectare on July 29, 1962, and the remaining one
(1) hectare on installment basis until fully paid. As affirmative
and/or special defense, defendants-appellants (respondents) alleged
that plaintiffs' action is barred by laches or has prescribed.
`Page 37 of 113
reason or another, the same may in the future be closed" the donated
property shall automatically revert to the donor.[9] Such condition,
not being contrary to law, morals, good customs, public order or
public policy was validly imposed in the donation.[10]
When the Municipality's acceptance of the donation was made known
to the donor, the former became the new owner of the donated
property -- donation being a mode of acquiring and transmitting
ownership[11] - notwithstanding the condition imposed by the donee.
The donation is perfected once the acceptance by the donee is made
known to the donor.[12] Accordingly, ownership is immediately
transferred to the latter and that ownership will only revert to the
donor if the resolutory condition is not fulfilled.
In this case, that resolutory condition is the construction of the school.
It has been ruled that when a person donates land to another on the
condition that the latter would build upon the land a school, the
condition imposed is not a condition precedent or a suspensive
condition but a resolutory one.[13] Thus, at the time of the sales made
in 1962 towards 1968, the alleged seller (Trinidad) could not have sold
the lots since she had earlier transferred ownership thereof by virtue
of the deed of donation. So long as the resolutory condition subsists
and is capable of fulfillment, the donation remains effective and the
donee continues to be the owner subject only to the rights of the
donor or his successors-in-interest under the deed of donation. Since
no period was imposed by the donor on when must the donee comply
with the condition, the latter remains the owner so long as he has
tried to comply with the condition within a reasonable period. Such
period, however, became irrelevant herein when the doneeMunicipality manifested through a resolution that it cannot comply
with the condition of building a school and the same was made
known to the donor. Only then - when the non-fulfillment of the
resolutory condition was brought to the donor's knowledge - that
ownership of the donated property reverted to the donor as provided
in the automatic reversion clause of the deed of donation.
thus, the contract involving the same is inexistent and void from the
beginning. However, nowhere in Article 1409 (4) is it provided that
the properties of a municipality, whether it be those for public use or
its patrimonial property[25] are outside the commerce of men.
Besides, the lots in this case were conditionally owned by the
municipality. To rule that the donated properties are outside the
commerce of men would render nugatory the unchallenged
reasonableness and justness of the condition which the donor has the
right to impose as owner thereof. Moreover, the objects referred to as
outsides the commerce of man are those which cannot be
appropriated, such as the open seas and the heavenly bodies.
With respect to the trial courts award of attorneys fees, litigation
expenses and moral damages, there is neither factual nor legal basis
thereof. Attorneys fees and expenses of litigation cannot, following
the general rule in Article 2208 of the New Civil Code, be recovered in
this case, there being no stipulation to that effect and the case does not
fall under any of the exceptions.[26] It cannot be said that private
respondents had compelled petitioners to litigate with third persons.
Neither can it be ruled that the former acted in gross and evident
bad faith in refusing to satisfy the latters claims considering that
private respondents were under an honest belief that they have a legal
right over the property by virtue of the deed of sale. Moral damages
cannot likewise be justified as none of the circumstances enumerated
under Articles 2219[27] and 2220[28] of the New Civil Code concur in
this case.
WHEREFORE, by virtue of the foregoing, the assailed decision of the
Court of Appeals is AFFIRMED.
SO ORDERED.
`Page 41 of 113
THIRD DIVISION
4.
SO ORDERED.
As found by the Court of Appeals and the lower court, the antecedent
facts of this case are as follows:
DECISION
ROMERO, J.:
This petition for review on certiorari questions the affirmance by the
Court of Appeals of the decision[1] of the Regional Trial Court of San
Pablo City, Branch 30, dismissing the complaint that prayed for the
nullification of a contract of sale of a 10-hectare property in Tanay,
Rizal in consideration of the amount of P40,000.00 and a 2.5 carat
emerald-cut diamond (Civil Case No. SP-2455). The lower courts
decision disposed of the case as follows:
WHEREFORE, premises considered, the Court hereby renders
judgment dismissing the complaint for lack of merit and ordering
plaintiff to pay:
1.
Defendant Dra. Ninevetch M. Cruz the sum of P300,000.00 as
and for moral damages and the sum of P100,000.00 as and for
exemplary damages;
2.
Defendant Atty. Juan Belarmino the sum of P250,000.00 as and
for moral damages and the sum of P150,000.00 as and for exemplary
damages;
3.
Defendant Dra. Cruz and Atty. Belarmino the sum of P25,000.00
each as and for attorneys fees and litigation expenses; and
`Page 42 of 113
jewelry was appraised only at P160,000.00, the parties agreed that the
balance of P40,000.00 would just be paid later in cash.
As pre-arranged, petitioner left Atty. Belarminos residence with
Dichoso and Mendoza and headed for the bank, arriving there at past
5:00 p.m. Dr. Cruz also arrived shortly thereafter, but the cashier
who kept the other key to the deposit box had already left the bank.
Dr. Cruz and Dichoso, therefore, looked for said cashier and found
him having a haircut. As soon as his haircut was finished, the cashier
returned to the bank and arrived there at 5:48 p.m., ahead of Dr. Cruz
and Dichoso who arrived at 5:55 p.m. Dr. Cruz and the cashier then
opened the safety deposit box, the former retrieving a transparent
plastic or cellophane bag with the jewelry inside and handing over
the same to petitioner. The latter took the jewelry from the bag, went
near the electric light at the banks lobby, held the jewelry against the
light and examined it for ten to fifteen minutes. After a while, Dr.
Cruz asked, Okay na ba iyan? Petitioner expressed his satisfaction
by nodding his head.
For services rendered, petitioner paid the agents, Dichoso and
Mendoza, the amount of US$300.00 and some pieces of jewelry. He
did not, however, give them half of the pair of earrings in question
which he had earlier promised.
Later, at about 8:00 oclock in the evening of the same day, petitioner
arrived at the residence of Atty. Belarmino complaining that the
jewelry given to him was fake. He then used a tester to prove the
alleged fakery. Meanwhile, at 8:30 p.m., Dichoso and Mendoza went
to the residence of Dr. Cruz to borrow her car so that, with Atty.
Belarmino, they could register the Tanay property. After Dr. Cruz
had agreed to lend her car, Dichoso called up Atty. Belarmino. The
latter, however, instructed Dichoso to proceed immediately to his
residence because petitioner was there. Believing that petitioner had
finally agreed to give them half of the pair of earrings, Dichoso went
`Page 43 of 113
possession of the vendee (Art. 1497, Civil Code; Kuenzle & Straff vs.
Watson & Co. 13 Phil. 26). The ownership and/or title over the
jewelries (sic) was transmitted immediately before 6:00 p.m. of
October 24, 1984. Plaintiff signified his approval by nodding his head.
Delivery or tradition, is one of the modes of acquiring ownership (Art.
712, Civil Code).
Similarly, when Exhibit D was executed, it was equivalent to the
delivery of the Tanay property in favor of Dra. Cruz. The execution
of the public instrument (Exh. D) operates as a formal or symbolic
delivery of the Tanay property and authorizes the buyer, Dra. Cruz to
use the document as proof of ownership (Florendo v. Foz, 20 Phil.
399). More so, since Exhibit D does not contain any proviso or
stipulation to the effect that title to the property is reserved with the
vendor until full payment of the purchase price, nor is there a
stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period
(Taguba v. Vda. De Leon, 132 SCRA 722; Luzon Brokerage Co. Inc. vs.
Maritime Building Co. Inc. 86 SCRA 305; Froilan v. Pan Oriental
Shipping Co. et al. 12 SCRA 276).[4]
Aside from concluding that the contract of barter or sale had in fact
been consummated when petitioner and Dr. Cruz parted ways at the
bank, the trial court likewise dwelt on the unexplained delay with
which petitioner complained about the alleged fakery. Thus:
x x x. Verily, plaintiff is already estopped to come back after the
lapse of considerable length of time to claim that what he got was
fake. He is a Business Management graduate of La Salle University,
Class 1978-79, a professional banker as well as a jeweler in his own
right. Two hours is more than enough time to make a switch of a
Russian diamond with the real diamond. It must be remembered that
in July 1984 plaintiff made a sketch of the subject jewelries (sic) at the
Prudential Bank. Plaintiff had a tester at 8:00 p.m. at the residence of
Atty. Belarmino. Why then did he not bring it out when he was
examining the subject jewelries (sic) at about 6:00 p.m. in the banks
GRANT REASONABLE
PLAINTIFF.[8]
DAMAGES
IN
FAVOR
OF
THE
have performed his job in accordance with law and should instead be
commended for his close attention to duty.
Having disposed of petitioners first contention, we now come to the
core issue of this petition which is whether the Court of Appeals erred
in upholding the validity of the contract of barter or sale under the
circumstances of this case.
The Civil Code provides that contracts are perfected by mere consent.
From this moment, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith,
usage and law.[17] A contract of sale is perfected at the moment there
is a meeting of the minds upon the thing which is the object of the
contract and upon the price.[18] Being consensual, a contract of sale
has the force of law between the contracting parties and they are
expected to abide in good faith by their respective contractual
commitments. Article 1358 of the Civil Code which requires the
embodiment of certain contracts in a public instrument, is only for
convenience,[19] and registration of the instrument only adversely
affects third parties.[20] Formal requirements are, therefore, for the
benefit of third parties. Non-compliance therewith does not adversely
affect the validity of the contract nor the contractual rights and
obligations of the parties thereunder.
It is evident from the facts of the case that there was a meeting of the
minds between petitioner and Dr. Cruz. As such, they are bound by
the contract unless there are reasons or circumstances that warrant its
nullification. Hence, the problem that should be addressed in this
case is whether or not under the facts duly established herein, the
contract can be voided in accordance with law so as to compel the
parties to restore to each other the things that have been the subject of
the contract with their fruits, and the price with interest.[21]
Contracts that are voidable or annullable, even though there may
have been no damage to the contracting parties are: (1) those where
`Page 47 of 113
exchange for his Tanay property, could not sever the juridical tie that
now bound him and Dr. Cruz. The nature and value of the thing he
had taken preclude its return after that supervening period within
which anything could have happened, not excluding the alteration of
the jewelry or its being switched with an inferior kind.
(2)
Both the trial and appellate courts, therefore, correctly ruled that there
were no legal bases for the nullification of the contract of sale.
Ownership over the parcel of land and the pair of emerald-cut
diamond earrings had been transferred to Dr. Cruz and petitioner,
respectively, upon the actual and constructive delivery thereof.[30]
Said contract of sale being absolute in nature, title passed to the
vendee upon delivery of the thing sold since there was no stipulation
in the contract that title to the property sold has been reserved in the
seller until full payment of the price or that the vendor has the right to
unilaterally resolve the contract the moment the buyer fails to pay
within a fixed period.[31] Such stipulations are not manifest in the
contract of sale.
Not one of these cases obtains here. This case should, of course, be
distinguished from De la Cruz v. Legaspi,[33] where the court held
that failure to pay the consideration after the notarization of the
contract as previously promised resulted in the vendees liability for
payment of interest. In the case at bar, there is no stipulation for the
payment of interest in the contract of sale nor proof that the Tanay
property produced fruits or income. Neither did petitioner demand
payment of the price as in fact he filed an action to nullify the contract
of sale.
All told, petitioner appears to have elevated this case to this Court for
the principal reason of mitigating the amount of damages awarded to
both private respondents which petitioner considers as exorbitant.
He contends that private respondents do not deserve at all the award
of damages. In fact, he pleads for the total deletion of the award as
regards private respondent Belarmino whom he considers a mere
nominal party because no specific claim for damages against him
was alleged in the complaint. When he filed the case, all that
petitioner wanted was that Atty. Belarmino should return to him the
owners duplicate copy of TCT No. 320725, the deed of sale executed
by Fr. Antonio Jacobe, the deed of redemption and the check alloted
for expenses. Petitioner alleges further that Atty. Belarmino should
not have delivered all those documents to Dr. Cruz because as the
lawyer for both the seller and the buyer in the sale contract, he
should have protected the rights of both parties. Moreover,
petitioner asserts that there was no firm basis for damages except for
Atty. Belarminos uncorroborated testimony.[34]
The malice with which Fule filed this case is apparent. Having taken
possession of the genuine jewelry of Dra. Cruz, Fule now wishes to
return a fake jewelry to Dra. Cruz and, more than that, get back the
real property, which his bank owns. Fule has obtained a genuine
jewelry which he could sell anytime, anywhere and to anybody,
without the same being traced to the original owner for practically
nothing. This is plain and simple, unjust enrichment.[40]
While, as a rule, moral damages cannot be recovered from a person
who has filed a complaint against another in good faith because it is
not sound policy to place a penalty on the right to litigate,[41] the
same, however, cannot apply in the case at bar. The factual findings
of the courts a quo to the effect that petitioner filed this case because
he was the victim of fraud; that he could not have been such a victim
because he should have examined the jewelry in question before
accepting delivery thereof, considering his exposure to the banking
and jewelry businesses; and that he filed the action for the
nullification of the contract of sale with unclean hands, all deserve full
faith and credit to support the conclusion that petitioner was
motivated more by ill will than a sincere attempt to protect his rights
in commencing suit against respondents.
As pointed out earlier, a closer scrutiny of the chain of events
immediately prior to and on October 24, 1984 itself would amply
demonstrate that petitioner was not simply negligent in failing to
exercise due diligence to assure himself that what he was taking in
exchange for his property were genuine diamonds. He had rather
placed himself in a situation from which it preponderantly appears
that his seeming ignorance was actually just a ruse. Indeed, he had
unnecessarily dragged respondents to face the travails of litigation in
speculating at the possible favorable outcome of his complaint when
he should have realized that his supposed predicament was his own
making. We, therefore, see here no semblance of an honest and
sincere belief on his part that he was swindled by respondents which
would entitle him to redress in court. It must be noted that before
`Page 50 of 113
petitioner was able to convince Dr. Cruz to exchange her jewelry for
the Tanay property, petitioner took pains to thoroughly examine said
jewelry, even going to the extent of sketching their appearance. Why
at the precise moment when he was about to take physical possession
thereof he failed to exert extra efforts to check their genuineness
despite the large consideration involved has never been explained at
all by petitioner. His acts thus failed to accord with what an ordinary
prudent man would have done in the same situation. Being an
experienced banker and a businessman himself who deliberately
skirted a legal impediment in the sale of the Tanay property and to
minimize the capital gains tax for its exchange, it was actually gross
recklessness for him to have merely conducted a cursory examination
of the jewelry when every opportunity for doing so was not denied
him. Apparently, he carried on his person a tester which he later used
to prove the alleged fakery but which he did not use at the time when
it was most needed. Furthermore, it took him two more hours of
unexplained delay before he complained that the jewelry he received
were counterfeit. Hence, we stated earlier that anything could have
happened during all the time that petitioner was in complete
possession and control of the jewelry, including the possibility of
substituting them with fake ones, against which respondents would
have a great deal of difficulty defending themselves. The truth is that
petitioner even failed to successfully prove during trial that the
jewelry he received from Dr. Cruz were not genuine. Add to that the
fact that he had been shrewd enough to bloat the Tanay propertys
price only a few days after he purchased it at a much lower value.
Thus, it is our considered view that if this slew of circumstances were
connected, like pieces of fabric sewn into a quilt, they would
sufficiently demonstrate that his acts were not merely negligent but
rather studied and deliberate.
SECOND DIVISION
[G.R. No. 143513. November 14, 2001]
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES, petitioner, vs.
COURT OF APPEALS and FIRESTONE CERAMICS, INC.,
respondents.
[G.R. No. 143590. November 14, 2001]
NATIONAL DEVELOPMENT CORPORATION,
FIRESTONE CERAMICS, INC., respondents.
petitioner,
vs.
DECISION
BELLOSILLO, J.:
A litigation is not simply a contest of litigants before the bar of public
opinion; more than that, it is a pursuit of justice through legal and
equitable means. To prevent the search for justice from evolving into
a competition for public approval, society invests the judiciary with
complete independence thereby insulating it from demands
expressed through any medium, the press not excluded. Thus, if the
court would merely reflect, and worse, succumb to the great
pressures of the day, the end result, it is feared, would be a travesty of
justice.
In the early sixties, petitioner National Development Corporation
(NDC), a government owned and controlled corporation created
under CA 182 as amended by CA 311 and PD No. 668, had in its
disposal a ten (10)-hectare property located along Pureza St., Sta.
Mesa, Manila. The estate was popularly known as the NDC
compound and covered by Transfer Certificates of Title Nos. 92885,
110301 and 145470.
event that it decided "to dispose and sell these properties including
the lot . . . . "[5]
The contracts of lease conspicuously contain an identically worded
provision requiring FIRESTONE to construct buildings and other
improvements within the leased premises worth several hundred
thousands of pesos.[6]
The parties' lessor-lessee relationship went smoothly until early 1988
when FIRESTONE, cognizant of the impending expiration of their
lease agreement with NDC, informed the latter through several letters
and telephone calls that it was renewing its lease over the property.
While its letter of 17 March 1988 was answered by Antonio A.
Henson, General Manager of NDC, who promised immediate action
on the matter, the rest of its communications remained
unacknowledged.[7] FIRESTONE's predicament worsened when
rumors of NDC's supposed plans to dispose of the subject property in
favor of petitioner Polytechnic University of the Philippines (PUP)
came to its knowledge. Forthwith, FIRESTONE served notice on
NDC conveying its desire to purchase the property in the exercise of
its contractual right of first refusal.
Apprehensive that its interest in the property would be disregarded,
FIRESTONE instituted an action for specific performance to compel
NDC to sell the leased property in its favor. FIRESTONE averred that
it was pre-empting the impending sale of the NDC compound to
petitioner PUP in violation of its leasehold rights over the 2.60hectare[8] property and the warehouses thereon which would expire
in 1999. FIRESTONE likewise prayed for the issuance of a writ of
preliminary injunction to enjoin NDC from disposing of the property
pending the settlement of the controversy.[9]
In support of its complaint, FIRESTONE adduced in evidence a letter
of Antonio A. Henson dated 15 July 1988 addressed to Mr. Jake C.
apart or otherwise detached from the two others, the purpose of the
lease as well as plaintiff's business operations would be rendered
useless and inoperative."[16] It thus decreed that FIRESTONE could
exercise its option to purchase the property until 2 June 1999
inasmuch as the 22 December 1978 contract embodied a covenant to
renew the lease for another ten (10) years at the option of the lessee as
well as an agreement giving the lessee the right of first refusal.
The trial court also sustained the constitutionality of Memorandum
Order No. 214 which was not per se hostile to FIRESTONE's property
rights, but deplored as prejudicial thereto the "very manner with
which defendants NDC and PUP interpreted and applied the same,
ignoring in the process that plaintiff has existing contracts of lease
protectable by express provisions in the Memorandum No. 214
itself."[17] It further explained that the questioned memorandum was
issued "subject to such liens/leases existing thereon"[18] and
petitioner PUP was under express instructions "to enter, occupy and
take possession of the transferred property subject to such leases or
liens and encumbrances that may be existing thereon"[19]
(underscoring supplied).
Petitioners PUP, NDC and the Executive Secretary separately filed
their Notice of Appeal, but a few days thereafter, or on 3 September
1996, perhaps realizing the groundlessness and the futility of it all, the
Executive Secretary withdrew his appeal.[20]
Subsequently, the Court of Appeals affirmed the decision of the trial
court ordering the sale of the property in favor of FIRESTONE but
deleted the award of attorney's fees in the amount of Three Hundred
Thousand Pesos (P300,000.00). Accordingly, FIRESTONE was given a
grace period of six (6) months from finality of the court's judgment
within which to purchase the property in questioned in the exercise of
its right of first refusal. The Court of Appeals observed that as there
was a sale of the subject property, NDC could not excuse itself from
`Page 54 of 113
We believe that the courts a quo did not hypothesize, much less
conjure, the sale of the disputed property by NDC in favor of
petitioner PUP. Aside from the fact that the intention of NDC and
PUP to enter into a contract of sale was clearly expressed in the
Memorandum Order No. 214,[31] a close perusal of the circumstances
of this case strengthens the theory that the conveyance of the property
from NDC to PUP was one of absolute sale, for a valuable
consideration, and not a mere paper transfer as argued by petitioners.
ordered the rescission of the sale which was made in violation of the
lessee's right of first refusal and further ordered the sale of the leased
property in favor of Mayfair Theater, as grantee of the right.
Emphatically, we held that "(a right of first priority) should be
enforced according to the law on contracts instead of the panoramic
and indefinite rule on human relations." We then concluded that the
execution of the right of first refusal consists in directing the grantor
to comply with his obligation according to the terms at which he
should have offered the property in favor of the grantee and at that
price when the offer should have been made.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.
Quisumbing, J., no part due to prior close relations.
`Page 59 of 113
exploitation of said mining claims into the Larap Iron Mines, a single
proprietorship owned solely by and belonging to him, on the same
royalty basis provided for in Exhibit "3". Thereafter, Gaite embarked
upon the development and exploitation of the mining claims in
question, opening and paving roads within and outside their
boundaries, making other improvements and installing facilities
therein for use in the development of the mines, and in time extracted
therefrom what he claim and estimated to be approximately 24,000
metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke the
authority granted by him to Gaite to exploit and develop the mining
claims in question, and Gaite assented thereto subject to certain
conditions. As a result, a document entitled "Revocation of Power of
Attorney and Contract" was executed on December 8, 1954 (Exhibit
"A"),wherein Gaite transferred to Fonacier, for the consideration of
P20,000.00, plus 10% of the royalties that Fonacier would receive from
the mining claims, all his rights and interests on all the roads,
improvements, and facilities in or outside said claims, the right to use
the business name "Larap Iron Mines" and its goodwill, and all the
records and documents relative to the mines. In the same document,
Gaite transferred to Fonacier all his rights and interests over the
"24,000 tons of iron ore, more or less" that the former had already
extracted from the mineral claims, in consideration of the sum of
P75,000.00, P10,000.00 of which was paid upon the signing of the
agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS (P65,000.00) will
be paid from and out of the first letter of credit covering the first
shipment of iron ores and of the first amount derived from the local
sale of iron ore made by the Larap Mines & Smelting Co. Inc., its
assigns, administrators, or successors in interests.
`Page 60 of 113
"ART. 1198. The debtor shall lose every right to make use of the
period:
(1) . . .
(2) When he does not furnish to the creditor the guaranties or
securities which he has promised.
(3) When by his own acts he has impaired said guaranties or securities
after their establishment, and when through fortuitous event they
disappear, unless he immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond
upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or replaced.
There is no merit in appellants' argument that Gaite's acceptance of
the surety company's bond with full knowledge that on its face it
would automatically expire within one year was a waiver of its
renewal after the expiration date. No such waiver could have been
intended, for Gaite stood to lose and had nothing to gain barely; and
if there was any, it could be rationally explained only if the appellants
had agreed to sell the ore and pay Gaite before the surety company's
bond expired on December 8, 1955. But in the latter case the
defendants-appellants' obligation to pay became absolute after one
year from the transfer of the ore to Fonacier by virtue of the deed
Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite acted
within his rights in demanding payment and instituting this action
one year from and after the contract (Exhibit "A") was executed, either
because the appellant debtors had impaired the securities originally
`Page 64 of 113
given and thereby forfeited any further time within which to pay; or
because the term of payment was originally of no more than one year,
and the balance of P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether
there were really 24,000 tons of iron ore in the stockpiles sold by
appellee Gaite to appellant Fonacier, and whether, if there had been a
short-delivery as claimed by appellants, they are entitled to the
payment of damages, we must, at the outset, stress two things: first,
that this is a case of a sale of a specific mass of fungible goods for a
single price or a lump sum, the quantity of "24,000 tons of iron ore,
more or less," stated in the contract Exhibit "A," being a mere estimate
by the parties of the total tonnage weight of the mass; and second,
that the evidence shows that neither of the parties had actually
measured of weighed the mass, so that they both tried to arrive at the
total quantity by making an estimate of the volume thereof in cubic
meters and then multiplying it by the estimated weight per ton of
each cubic meter.
The sale between the parties is a sale of a specific mass or iron ore
because no provision was made in their contract for the measuring or
weighing of the ore sold in order to complete or perfect the sale, nor
was the price of P75,000,00 agreed upon by the parties based upon
any such measurement.(see Art. 1480, second par., New Civil Code).
The subject matter of the sale is, therefore, a determinate object, the
mass, and not the actual number of units or tons contained therein, so
that all that was required of the seller Gaite was to deliver in good
faith to his buyer all of the ore found in the mass, notwithstanding
that the quantity delivered is less than the amount estimated by them
(Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co.,
Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil Code). There
is no charge in this case that Gaite did not deliver to appellants all the
ore found in the stockpiles in the mining claims in questions; Gaite
had, therefore, complied with his promise to deliver, and appellants
in turn are bound to pay the lump price.
`Page 66 of 113
THIRD DIVISION
[G.R. No. 115349. April 18, 1997]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE
COURT OF APPEALS, THE COURT OF TAX APPEALS and
ATENEO DE MANILA UNIVERSITY, respondents.
DECISION
PANGANIBAN, J.:
In conducting researches and studies of social organizations and
cultural values thru its Institute of Philippine Culture, is the Ateneo
de Manila University performing the work of an independent
contractor and thus taxable within the purview of then Section 205 of
the National Internal Revenue Code levying a three percent
contractors tax? This question is answered by the Court in the
negative as it resolves this petition assailing the Decision[1] of the
Respondent Court of Appeals[2] in CA-G.R. SP No. 31790
promulgated on April 27, 1994 affirming that of the Court of Tax
Appeals.[3]
Not in accord with said decision, petitioner has come to this Court via
the present petition for review raising the following issues:
1)WHETHER OR NOT PRIVATE RESPONDENT FALLS UNDER
THE PURVIEW OF INDEPENDENT CONTRACTOR PURSUANT
TO SECTION 205 OF THE TAX CODE; and
2) WHETHER OR NOT PRIVATE RESPONDENT IS SUBJECT TO 3%
CONTRACTORS TAX UNDER SECTION 205 OF THE TAX CODE.
The pertinent portions of Section 205 of the National Internal Revenue
Code, as amended, provide:
Sec. 205. Contractor, proprietors or operators of dockyards, and
others. - A contractors tax of three per centum of the gross receipts is
hereby imposed on the following:
xxx
xxx
xxx
(16)
Business agents and other independent contractors except
persons, associations and corporations under contract for embroidery
and apparel for export, as well as their agents and contractors and
except gross receipts of or from a pioneer industry registered with the
Board of Investments under Republic Act No. 5186:
xxx
xxx
xxx
to the occupation tax under Section 12 of the Local Tax Code) whose
activity consists essentially of the sale of all kinds of services for a fee
regardless of whether or not the performance of the service calls for
the exercise or use of the physical or mental faculties of such
contractors or their employees.
xxx
xxx
xxx
The parts of then Section 205 of the National Internal Revenue Code
germane to the case before us read:
SEC. 205. Contractors, proprietors or operators of dockyards, and
others. -- A contractors tax of three per centum of the gross receipts
is hereby imposed on the following:
xxx
xxx
xxx
(16)
Business agents and other independent contractors, except
persons, associations and corporations under contract for embroidery
and apparel for export, as well as their agents and contractors, and
except gross receipts of or from a pioneer industry registered with the
Board of Investments under the provisions of Republic Act No. 5186;
xxx
xxx
xxx
xxx
xxx
(e)
The institution must undertake research and operate with a
competent qualified staff at least three graduate departments in
accordance with the rules and standards for graduate education. One
of the departments shall be science and technology. The competence
of the staff shall be judged by their effective teaching, scholarly
publications and research activities published in its school journal as
well as their leadership activities in the profession.
(f)
The institution must show evidence of adequate and stable
financial resources and support, a reasonable portion of which should
be devoted to institutional development and research. (underscoring
supplied)
xxx
xxx
x x x
32.
University status may be withdrawn, after due notice and
hearing, for failure to maintain satisfactorily the standards and
requirements therefor.[20]
The University.
A
Because of our faculty development program as a university,
because a university has to have its own research institute.[24]
So, why is it that Ateneo continues to operate and conduct researches
through its Institute of Philippine Culture when it undisputedly loses
not an insignificant amount in the process? The plain and simple
answer is that private respondent is not a contractor selling its
services for a fee but an academic institution conducting these
researches pursuant to its commitments to education and, ultimately,
to public service. For the institute to have tenaciously continued
operating for so long despite its accumulation of significant losses,
we can only agree with both the Court of Tax Appeals and the Court
of Appeals that education and not profit is [IPCs] motive for
undertaking the research projects.[25]
`Page 74 of 113
issued, and the truck was seized in the province of Isabela, by persons
who represented themselves to be special sheriffs of the court, but
who turned out to be employees of the plaintiff-appellant. The truck
was brought by such persons all the way back to Metro Manila.
Thereafter, defendant spouses filed a counterbond, and the lower
court ordered the return of the truck. This was not immediately
implemented because the defendant spouses were met with delaying
tactics of the plaintiff-appellant, and when they finally recovered the
truck, they found the same to be "cannibalized". This was graphically
recounted in the report (Exhibit "3") of Deputy Sheriff Anastacio
Dizon, who assisted the spouses in recovering the vehicle, excerpts of
which are as follows:
On February 14, 1983, the undersigned contacted Mr. Villanueva,
Branch Manager of the FILINVEST at Bo. Dolores, San Fernando,
Pampanga and he gave the information that the said Isuzu Cargo
Truck, subject of the aforesaid Court Order, was already delivered to
their main garage at Bo. Talon, Las Pias; Metro Manila. Mr.
Villanueva further told the undersigned that in order to effectively
enforce the aforementioned Court Order, the undersigned should
discuss the matter with Mr. Telesforo (Jun) Isidro, Collection incharge, and Mr. Gaspar Antonio delos Santos, Vice President for
Branch Administration of the FILINVEST main office at Makati,
Metro Manila.
On February 18, 1983, defendant Marciana Tadiaman, Atty. Benites
and the undersigned contacted Messrs. Gaspar Antonio delos Santos
and Telesforo (Jun) Isidro at the main office, FILINVEST at Paseo de
Roxas, Makati, Metro Manila and we discussed the smooth retaking
of possession by the defendants of the 10-wheeler Isuzu Cargo Truck
with motor No. E 120-22041, Serial No. SPM 710164864. Messrs. Delos
Santos and Isidro alternatively argued that the Traveler's Insurance
`Page 75 of 113
`Page 76 of 113
(a) The sum of P88,333.32 which is the balance of the promissory note
as of September 26, 1982, with interest thereon at 14% per
annum from said date.
(b) The sum equivalent to 25% of the amount sued upon, as and for
attorney's fees, that is P88,333.32 plus the stipulated interest; and
SO ORDERED. 4
(1) Actual damages representing lost spare parts while in the custody
of plaintiff in its garage being hidden from defendants, in the sum of
P50,000.00;
The plaintiff-appellant argues that it had the right to seize the truck
from the moment that the defendants-appellees defaulted in the
payment of the monthly installments, and to institute an action for
`Page 77 of 113
Anent the moral damages, the trial court ruled that the acts of the
petitioner were in total disregard of Articles 19, 20, and 21 of the Civil
Code. 17 It added that the petitioner had not only caused actual
damages in lost earnings, but had also caused the private respondents
to suffer indignities at the hands of the petitioner's personnel in
hiding the truck in question, misleading them, and making them
work for the release of the truck for about two weeks, thereby
justifying the award of moral damages along with the exemplary and
other damages in favor of the private respondents. 18
We agree with this finding of the trial court. The petitioner's acts
clearly fall within the contemplation of Articles 19 and 21 of the Civil
Code. 19 The acts of fraudulently taking the truck, hiding it from the
private respondents, and removing its spare parts show nothing but a
willful intention to cause loss to the private respondents that is
punctuated with bad faith and is obviously contrary to good customs.
Thus, the private respondents are entitled to the moral damages they
prayed for, for under Article 2219 of the Civil Code, moral damages
may be recovered in cases involving acts referred to in Article 21 of
the same Code.
The private respondents prayed for nominal damages of P30,000.00
which the trial court did not award them. Having failed to appeal this
omission by the trial court, we cannot make anymore such award at
this point.
The award of exemplary damages is in order in view of the wanton,
fraudulent, and oppressive manner by which the petitioner sought to
enforce its right to the possession of the mortgaged vehicle. Article
2232 of the Civil Code provides:
In contracts and quasi-contracts, the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
`Page 83 of 113
GONZALO
PUYAT
&
SONS,
INC., petitioner,
vs.
ARCO AMUSEMENT COMPANY (formerly known as Teatro
Arco), respondent.
Feria
&
Lao
for
J. W. Ferrier and Daniel Me. Gomez for respondent.
petitioner.
LAUREL, J.:
This is a petition for the issuance of a writ of certiorari to the Court of
Appeals for the purpose of reviewing its Amusement Company
(formerly known as Teatro Arco), plaintiff-appellant, vs. Gonzalo
Puyat and Sons. Inc., defendant-appellee."
It appears that the respondent herein brought an action against the
herein petitioner in the Court of First Instance of Manila to secure a
reimbursement of certain amounts allegedly overpaid by it on
account of the purchase price of sound reproducing equipment and
machinery ordered by the petitioner from the Starr Piano Company of
Richmond, Indiana, U.S.A. The facts of the case as found by the trial
court and confirmed by the appellate court, which are admitted by the
respondent, are as follows:
In the year 1929, the "Teatro Arco", a corporation duly organized
under the laws of the Philippine Islands, with its office in Manila, was
engaged in the business of operating cinematographs. In 1930, its
name was changed to Arco Amusement Company. C. S. Salmon was
the president, while A. B. Coulette was the business manager. About
the same time, Gonzalo Puyat & Sons, Inc., another corporation doing
business in the Philippine Islands, with office in Manila, in addition to
its other business, was acting as exclusive agents in the Philippines for
date, that is to say, that the plaintiff would pay for the equipment the
amount of $1,600, which was supposed to be the price quoted by the
Starr Piano Company, plus 10 per cent commission, plus all expenses
incurred. The equipment under the second order arrived in due time,
and the defendant was duly paid the price of $1,600 with its 10 per
cent commission, and $160, for all expenses and charges. This amount
of $160 does not represent actual out-of-pocket expenses paid by the
defendant, but a mere flat charge and rough estimate made by the
defendant equivalent to 10 per cent of the price of $1,600 of the
equipment.
About three years later, in connection with a civil case in Vigan, filed
by one Fidel Reyes against the defendant herein Gonzalo Puyat &
Sons, Inc., the officials of the Arco Amusement Company discovered
that the price quoted to them by the defendant with regard to their
two orders mentioned was not the net price but rather the list price,
and that the defendants had obtained a discount from the Starr Piano
Company. Moreover, by reading reviews and literature on prices of
machinery and cinematograph equipment, said officials of the
plaintiff were convinced that the prices charged them by the
defendant were much too high including the charges for out-ofpocket expense. For these reasons, they sought to obtain a reduction
from the defendant or rather a reimbursement, and failing in this they
brought the present action.
The trial court held that the contract between the petitioner and the
respondent was one of outright purchase and sale, and absolved that
petitioner from the complaint. The appellate court, however, by a
division of four, with one justice dissenting held that the relation
between petitioner and respondent was that of agent and principal,
the petitioner acting as agent of the respondent in the purchase of the
equipment in question, and sentenced the petitioner to pay the
respondent alleged overpayments in the total sum of $1,335.52 or
P2,671.04, together with legal interest thereon from the date of the
filing of the complaint until said amount is fully paid, as well as to
pay the costs of the suit in both instances. The appellate court further
argued that even if the contract between the petitioner and the
respondent was one of purchase and sale, the petitioner was guilty of
fraud in concealing the true price and hence would still be liable to
reimburse the respondent for the overpayments made by the latter.
The petitioner now claims that the following errors have been
incurred by the appellate court:
I. El Tribunal de Apelaciones incurrio en error de derecho al declarar
que, segun hechos, entre la recurrente y la recurrida existia una
relacion implicita de mandataria a mandante en la transaccion de que
se trata, en vez de la de vendedora a compradora como ha declarado
el Juzgado de Primera Instncia de Manila, presidido entonces por el
hoy Magistrado Honorable Marcelino Montemayor.
II. El Tribunal de Apelaciones incurrio en error de derecho al declarar
que, suponiendo que dicha relacion fuerra de vendedora a
compradora, la recurrente obtuvo, mediante dolo, el consentimiento
de la recurrida en cuanto al precio de $1,700 y $1,600 de las
maquinarias y equipos en cuestion, y condenar a la recurrente ha
obtenido de la Starr Piano Company of Richmond, Indiana.
We sustain the theory of the trial court that the contract between the
petitioner and the respondent was one of purchase and sale, and not
one of agency, for the reasons now to be stated.
In the first place, the contract is the law between the parties and
should include all the things they are supposed to have been agreed
upon. What does not appear on the face of the contract should be
regarded merely as "dealer's" or "trader's talk", which can not bind
either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212; Bank
`Page 85 of 113
v. Brosscell, 120 III., 161; Bank v. Palmer, 47 III., 92; Hosser v. Copper,
8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters, Exhibits 1
and 2, by which the respondent accepted the prices of $1,700 and
$1,600, respectively, for the sound reproducing equipment subject of
its contract with the petitioner, are clear in their terms and admit no
other interpretation that the respondent in question at the prices
indicated which are fixed and determinate. The respondent admitted
in its complaint filed with the Court of First Instance of Manila that
the petitioner agreed to sell to it the first sound reproducing
equipment and machinery. The third paragraph of the respondent's
cause of action states:
3. That on or about November 19, 1929, the herein plaintiff
(respondent) and defendant (petitioner) entered into an agreement,
under and by virtue of which the herein defendant was to secure from
the United States, and sell and deliver to the herein plaintiff, certain
sound reproducing equipment and machinery, for which the said
defendant, under and by virtue of said agreement, was to receive the
actual cost price plus ten per cent (10%), and was also to be
reimbursed for all out of pocket expenses in connection with the
purchase and delivery of such equipment, such as costs of telegrams,
freight, and similar expenses. (Emphasis ours.)
We agree with the trial judge that "whatever unforseen events might
have taken place unfavorable to the defendant (petitioner), such as
change in prices, mistake in their quotation, loss of the goods not
covered by insurance or failure of the Starr Piano Company to
properly fill the orders as per specifications, the plaintiff (respondent)
might still legally hold the defendant (petitioner) to the prices fixed of
$1,700 and $1,600." This is incompatible with the pretended relation of
agency between the petitioner and the respondent, because in agency,
the agent is exempted from all liability in the discharge of his
commission provided he acts in accordance with the instructions
received from his principal (section 254, Code of Commerce), and the
principal must indemnify the agent for all damages which the latter
may incur in carrying out the agency without fault or imprudence on
his part (article 1729, Civil Code).
While the latters, Exhibits 1 and 2, state that the petitioner was to
receive ten per cent (10%) commission, this does not necessarily make
the petitioner an agent of the respondent, as this provision is only an
additional price which the respondent bound itself to pay, and which
stipulation is not incompatible with the contract of purchase and sale.
(SeeQuiroga vs. Parsons Hardware Co., 38 Phil., 501.)
In the second place, to hold the petitioner an agent of the respondent
in the purchase of equipment and machinery from the Starr Piano
Company of Richmond, Indiana, is incompatible with the admitted
fact that the petitioner is the exclusive agent of the same company in
the Philippines. It is out of the ordinary for one to be the agent of both
the vendor and the purchaser. The facts and circumstances indicated
do not point to anything but plain ordinary transaction where the
respondent enters into a contract of purchase and sale with the
petitioner, the latter as exclusive agent of the Starr Piano Company in
the United States.
It follows that the petitioner as vendor is not bound to reimburse the
respondent as vendee for any difference between the cost price and
the sales price which represents the profit realized by the vendor out
of the transaction. This is the very essence of commerce without
which merchants or middleman would not exist.
The respondents contends that it merely agreed to pay the cost price
as distinguished from the list price, plus ten per cent (10%)
commission and all out-of-pocket expenses incurred by the petitioner.
The distinction which the respondents seeks to draw between the cost
price and the list price we consider to be spacious. It is to be observed
`Page 86 of 113
that the twenty-five per cent (25%) discount granted by the Starr
piano Company to the petitioner is available only to the latter as the
former's exclusive agent in the Philippines. The respondent could not
have secured this discount from the Starr Piano Company and neither
was the petitioner willing to waive that discount in favor of the
respondent. As a matter of fact, no reason is advanced by the
respondent why the petitioner should waive the 25 per cent discount
granted it by the Starr Piano Company in exchange for the 10 percent
commission offered by the respondent. Moreover, the petitioner was
not duty bound to reveal the private arrangement it had with the
Starr Piano Company relative to such discount to its prospective
customers, and the respondent was not even aware of such an
arrangement. The respondent, therefore, could not have offered to
pay a 10 per cent commission to the petitioner provided it was given
the benefit of the 25 per cent discount enjoyed by the petitioner. It is
well known that local dealers acting as agents of foreign
manufacturers, aside from obtaining a discount from the home office,
sometimes add to the list price when they resell to local purchasers. It
was apparently to guard against an exhorbitant additional price that
the respondent sought to limit it to 10 per cent, and the respondent is
estopped from questioning that additional price. If the respondent
later on discovers itself at the short end of a bad bargain, it alone must
bear the blame, and it cannot rescind the contract, much less compel a
reimbursement of the excess price, on that ground alone. The
respondent could not secure equipment and machinery manufactured
by the Starr Piano Company except from the petitioner alone; it
willingly paid the price quoted; it received the equipment and
machinery as represented; and that was the end of the matter as far as
the respondent was concerned. The fact that the petitioner obtained
more or less profit than the respondent calculated before entering into
the contract or reducing the price agreed upon between the petitioner
and the respondent. Not every concealment is fraud; and short of
`Page 87 of 113
ANDRES
QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the following
tenor was entered into by and between the plaintiff, as party of the
first part, and J. Parsons (to whose rights and obligations the present
defendant later subrogated itself), as party of the second part:
CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA
AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN
MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN
THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his
beds in the Visayan Islands to J. Parsons under the following
conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons
for the latter's establishment in Iloilo, and shall invoice them at the
same price he has fixed for sales, in Manila, and, in the invoices, shall
make and allowance of a discount of 25 per cent of the invoiced
prices, as commission on the sale; and Mr. Parsons shall order the
beds by the dozen, whether of the same or of different styles.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds
received, within a period of sixty days from the date of their
shipment.
`Page 88 of 113
ART. 3. Mr. Parsons may sell, or establish branches of his agency for
the sale of "Quiroga" beds in all the towns of the Archipelago where
there are no exclusive agents, and shall immediately report such
action to Mr. Quiroga for his approval.
ART. 4. This contract is made for an unlimited period, and may be
terminated by either of the contracting parties on a previous notice of
ninety days to the other party.
Of the three causes of action alleged by the plaintiff in his complaint,
only two of them constitute the subject matter of this appeal and both
substantially amount to the averment that the defendant violated the
following obligations: not to sell the beds at higher prices than those
of the invoices; to have an open establishment in Iloilo; itself to
conduct the agency; to keep the beds on public exhibition, and to pay
for the advertisement expenses for the same; and to order the beds by
the dozen and in no other manner. As may be seen, with the
exception of the obligation on the part of the defendant to order the
beds by the dozen and in no other manner, none of the obligations
imputed to the defendant in the two causes of action are expressly set
forth in the contract. But the plaintiff alleged that the defendant was
his agent for the sale of his beds in Iloilo, and that said obligations are
implied in a contract of commercial agency. The whole question,
therefore, reduced itself to a determination as to whether the
defendant, by reason of the contract hereinbefore transcribed, was a
purchaser or an agent of the plaintiff for the sale of his beds.
In order to classify a contract, due regard must be given to its
essential clauses. In the contract in question, what was essential, as
constituting its cause and subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at
the price stipulated, and that the defendant was to pay the price in the
manner stipulated. The price agreed upon was the one determined by
the plaintiff for the sale of these beds in Manila, with a discount of
from 20 to 25 per cent, according to their class. Payment was to be
made at the end of sixty days, or before, at the plaintiff's request, or in
cash, if the defendant so preferred, and in these last two cases an
additional discount was to be allowed for prompt payment. These are
precisely the essential features of a contract of purchase and sale.
There was the obligation on the part of the plaintiff to supply the
beds, and, on the part of the defendant, to pay their price. These
features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does
not pay its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he does not succeed
in selling it, he returns it. By virtue of the contract between the
plaintiff and the defendant, the latter, on receiving the beds, was
necessarily obliged to pay their price within the term fixed, without
any other consideration and regardless as to whether he had or had
not sold the beds.
It would be enough to hold, as we do, that the contract by and
between the defendant and the plaintiff is one of purchase and sale, in
order to show that it was not one made on the basis of a commission
on sales, as the plaintiff claims it was, for these contracts are
incompatible with each other. But, besides, examining the clauses of
this contract, none of them is found that substantially supports the
plaintiff's contention. Not a single one of these clauses necessarily
conveys the idea of an agency. The words commission on sales used
in clause (A) of article 1 mean nothing else, as stated in the contract
itself, than a mere discount on the invoice price. The word agency,
also used in articles 2 and 3, only expresses that the defendant was the
only one that could sell the plaintiff's beds in the Visayan Islands.
With regard to the remaining clauses, the least that can be said is that
they are not incompatible with the contract of purchase and sale.
`Page 89 of 113
its essential agreements are clearly set forth and plainly show that the
contract belongs to a certain kind and not to another. Furthermore,
the return made was of certain brass beds, and was not effected in
exchange for the price paid for them, but was for other beds of
another kind; and for the letter Exhibit L-1, requested the plaintiff's
prior consent with respect to said beds, which shows that it was not
considered that the defendant had a right, by virtue of the contract, to
make this return. As regards the shipment of beds without previous
notice, it is insinuated in the record that these brass beds were
precisely the ones so shipped, and that, for this very reason, the
plaintiff agreed to their return. And with respect to the so-called
commissions, we have said that they merely constituted a discount on
the invoice price, and the reason for applying this benefit to the beds
sold directly by the plaintiff to persons in Iloilo was because, as the
defendant obligated itself in the contract to incur the expenses of
advertisement of the plaintiff's beds, such sales were to be considered
as a result of that advertisement.
In respect to the defendant's obligation to order by the dozen, the only
one expressly imposed by the contract, the effect of its breach would
only entitle the plaintiff to disregard the orders which the defendant
might place under other conditions; but if the plaintiff consents to fill
them, he waives his right and cannot complain for having acted thus
at his own free will.
For the foregoing reasons, we are of opinion that the contract by and
between the plaintiff and the defendant was one of purchase and sale,
and that the obligations the breach of which is alleged as a cause of
action are not imposed upon the defendant, either by agreement or by
law.
The judgment appealed from is affirmed, with costs against the
appellant. So ordered.
`Page 90 of 113
ESGUERRA, J.:
Petition for review on certiorari of the decision of the Court of Tax
Appeals in CTA Case No. 681, dated November 29, 1966, assessing a
compensating tax of P174,441.62 on the Engineering Equipment and
Supply Company.
As found by the Court of Tax Appeals, and as established by the
evidence on record, the facts of this case are as follows:
`Page 91 of 113
Engineering to file also with this Court its appeal, docketed as G.R.
No. L-27452.
Since the two cases, G.R. No. L-27044 and G.R. No. L-27452, involve
the same parties and issues, We have decided to consolidate and
jointly decide them.
Engineering in its Petition claims that the Court of Tax Appeals
committed the following errors:
1. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company liable to the 30% compensating tax on
its importations of equipment and ordinary articles used in the central
type air conditioning systems it designed, fabricated, constructed and
installed in the buildings and premises of its customers, rather than to
the compensating tax of only 7%;
2. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company guilty of fraud in effecting the said
importations on the basis of incomplete quotations from the contents
of alleged photostat copies of documents seized illegally from
Engineering Equipment and Supply Company which should not have
been admitted in evidence;
3. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company liable to the 25% surcharge prescribed
in Section 190 of the Tax Code;
4. That the Court of Tax Appeals erred in holding the assessment as
not having prescribed;
5. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company liable for the sum of P174,141.62 as
30% compensating tax and 25% surcharge instead of completely
absolving it from the deficiency assessment of the Commissioner.
`Page 92 of 113
The Commissioner on the other hand claims that the Court of Tax
Appeals erred:
1. In holding that the respondent company is a contractor and not a
manufacturer.
2. In holding respondent company liable to the 3% contractor's tax
imposed by Section 191 of the Tax Code instead of the 30% sales tax
prescribed in Section 185(m) in relation to Section 194(x) both of the
same Code;
3. In holding that the respondent company is subject only to the 30%
compensating tax under Section 190 of the Tax Code and not to the
30% advance sales tax imposed by section 183 (b), in relation to
section 185(m) both of the same Code, on its importations of parts and
accessories of air conditioning units;
4. In not holding the company liable to the 50% fraud surcharge under
Section 183 of the Tax Code on its importations of parts and
accessories of air conditioning units, notwithstanding the finding of
said court that the respondent company fraudulently misdeclared the
said importations;
5. In holding the
compensating tax
deficiency advance
and 50% surcharge
1956.
occupying the premises; the purpose for which the various air
conditioning areas are to be used; and the sources of heat gain or
cooling load on the plant such as sun load, lighting, and other
electrical appliances which are or may be in the plan. (t.s.n. p. 34, Vol.
I) Engineering also testified during the hearing in the Court of Tax
Appeals that relative to the installation of air conditioning system,
Engineering designed and engineered complete each particular plant
and that no two plants were identical but each had to be engineered
separately.
As found by the lower court, which finding 4 We adopt
Engineering, in a nutshell, fabricates, assembles, supplies and installs
in the buildings of its various customers the central type air
conditioning system; prepares the plans and specifications therefor
which are distinct and different from each other; the air conditioning
units and spare parts or accessories thereof used by petitioner are not
the window type of air conditioner which are manufactured,
assembled and produced locally for sale to the general market; and
the imported air conditioning units and spare parts or accessories
thereof are supplied and installed by petitioner upon previous orders
of its customers conformably with their needs and requirements.
The facts and circumstances aforequoted support the theory that
Engineering is a contractor rather than a manufacturer.
The Commissioner in his Brief argues that "it is more in accord with
reason and sound business management to say that anyone who
desires to have air conditioning units installed in his premises and
who is in a position and willing to pay the price can order the same
from the company (Engineering) and, therefore, Engineering could
have mass produced and stockpiled air conditioning units for sale to
the public or to any customer with enough money to buy the same."
This is untenable in the light of the fact that air conditioning units,
projects listed ... referred to in the list, Exh. "F" are identical in every
respect? I mean every plan or system covered by these different
contracts are identical in standard in every respect, so that you can
reproduce them?
the equipment upon the value of which the tax herein imposed was
levied in the performance of its contracts with its customers, and that
the customers did not purchase the equipment and have the same
installed.
A No, sir. They are not all standard. On the contrary, none of them
are the same. Each one must be designed and constructed to meet the
particular requirements, whether the application is to be operated.
(t.s.n. pp. 101-102)
What We consider as on all fours with the case at bar is the case
of S.M. Lawrence Co. vs. McFarland,Commissioner of Internal
Revenue of the State of Tennessee and McCanless, 355 SW 2d, 100,
101, "where the cause presents the question of whether one engaged
in the business of contracting for the establishment of air conditioning
system in buildings, which work requires, in addition to the
furnishing of a cooling unit, the connection of such unit with electrical
and plumbing facilities and the installation of ducts within and
through walls, ceilings and floors to convey cool air to various parts
of the building, is liable for sale or use tax as a contractor rather than a
retailer of tangible personal property. Appellee took the Position that
appellant was not engaged in the business of selling air conditioning
equipment as such but in the furnishing to its customers of completed
air conditioning systems pursuant to contract, was a contractor
engaged in the construction or improvement of real property, and as
such was liable for sales or use tax as the consumer of materials and
equipment used in the consummation of contracts, irrespective of the
tax status of its contractors. To transmit the warm or cool air over the
buildings, the appellant installed system of ducts running from the
basic units through walls, ceilings and floors to registers. The contract
called for completed air conditioning systems which became
permanent part of the buildings and improvements to the realty." The
Court held the appellant a contractor which used the materials and
II
We take up next the issue of fraud. The Commissioner charged
Engineering with misdeclaration of the imported air conditioning
`Page 97 of 113
`Page 98 of 113
And in response to the aforequoted letter, Trane Co. wrote on July 30,
1953, suggesting a solution, viz:
We feel that we can probably solve all the problems by following the
procedure outlined in your letter of March 25, 1953 wherein you
stated that in all future jobs you would enclose photostatic copies of
your import license so that we might make up two sets of invoices:
one set describing equipment ordered simply according to the way
that they are listed on the import license and another according to our
ordinary regular methods of order write-up. We would then include
the set made up according to the import license in the shipping boxes
themselves and use those items as our actual shipping documents and
invoices, and we will send the other regular invoice to you, by
separate correspondence. (Exh- No. "3-F-1", p. 144 BIR rec.)
Another interesting letter of Engineering is one dated August 27, 1955
(Exh. "3-C" p. 141 BIR rec.)
In the process of clearing the shipment from the piers, one of the
Customs inspectors requested to see the packing list. Upon presenting
the packing list, it was discovered that the same was prepared on a
copy of your letterhead which indicated that the Trane Co.
manufactured air conditioning, heating and heat transfer equipment.
Accordingly, the inspectors insisted that this equipment was being
imported for air conditioning purposes. To date, we have not been
able to clear the shipment and it is possible that we will be required to
pay heavy taxes on equipment.
The purpose of this letter is to request that in the future, no
documents of any kind should be sent with the order that indicate in
any way that the equipment could possibly be used for air
conditioning.
`Page 99 of 113
SO ORDERED.
Makalintal, C.J., Castro, Makasiar and Martin, JJ., concur.
III
Lastly the question of prescription of the tax assessment has been put
in issue. Engineering contends that it was not guilty of tax fraud in
effecting the importations and, therefore, Section 332(a) prescribing
ten years is inapplicable, claiming that the pertinent prescriptive
period is five years from the date the questioned importations were
made. A review of the record however reveals that Engineering did
file a tax return or declaration with the Bureau of Customs before it
paid the advance sales tax of 7%. And the declaration filed reveals
that it did in fact misdeclare its importations. Section 332 of the Tax
Code which provides:
Section 332. Exceptions as to period of limitation of assessment and
collection of taxes.
(a) In the case of a false or fraudulent return with intent to evade tax
or of a failure to file a return, the tax may be assessed, or a proceeding
in court for the collection of such tax may be begun without
assessment at any time within ten years after the discovery of the
falsity, fraud or omission.
is applicable, considering the preponderance of evidence of fraud
with the intent to evade the higher rate of percentage tax due from
Engineering. The, tax assessment was made within the period
prescribed by law and prescription had not set in against the
Government.
WHEREFORE, the decision appealed from is affirmed with the
modification that Engineering is hereby also made liable to pay the
50% fraud surcharge.
`Page 101 of 113
CELESTINO
CO
&
COMPANY, petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE, respondent.
Office of the Solicitor General Ambrosio Padilla, Fisrt Assistant
Solicitor General Guillermo E. Torres and Solicitor Federico V. Sian
for respondent.
BENGZON, J.:
Appeal from a decision of the Court of Tax Appeals.
Celestino Co & Company is a duly registered general copartnership
doing business under the trade name of "Oriental Sash Factory". From
1946 to 1951 it paid percentage taxes of 7 per cent on the gross receipts
of its sash, door and window factory, in accordance with section one
hundred eighty-six of the National Revenue Code imposing taxes on
sale of manufactured articles. However in 1952 it began to claim
liability only to the contractor's 3 per cent tax (instead of 7 per cent)
under section 191 of the same Code; and having failed to convince the
Bureau of Internal Revenue, it brought the matter to the Court of Tax
Appeals, where it also failed. Said the Court:
To support his contention that his client is an ordinary contractor . . .
counsel presented . . . duplicate copies of letters, sketches of doors and
windows and price quotations supposedly sent by the manager of the
Oriental Sash Factory to four customers who allegedly made special
orders to doors and window from the said factory. The conclusion
that counsel would like us to deduce from these few exhibits is that
the Oriental Sash Factory does not manufacture ready-made doors,
sash and windows for the public but only upon special order of its
select customers. . . . I cannot believe that petitioner company would
take, as in fact it has taken, all the trouble and expense of registering a
special trade name for its sash business and then orders company
stationery carrying the bold print "Oriental Sash Factory (Celestino Co
& Company, Prop.) 926 Raon St. Quiapo, Manila, Tel. No.
33076,Manufacturers of all kinds of doors, windows, sashes, furniture,
etc. used season-dried and kiln-dried lumber, of the best quality
workmanships" solely for the purpose of supplying the needs for
doors, windows and sash of its special and limited customers. One ill
note that petitioner has chosen for its tradename and has offered itself
to the public as a "Factory", which means it is out to do business, in its
chosen lines on a big scale. As a general rule, sash factories receive
orders for doors and windows of special design only in particular
cases but the bulk of their sales is derived from a ready-made doors
and windows of standard sizes for the average home. Moreover, as
shown from the investigation of petitioner's book of accounts, during
the period from January 1, 1952 to September 30, 1952, it sold sash,
doors and windows worth P188,754.69. I find it difficult to believe
that this amount which runs to six figures was derived by petitioner
entirely from its few customers who made special orders for these
items.
Even if we were to believe petitioner's claim that it does not
manufacture ready-made sash, doors and windows for the public and
that it makes these articles only special order of its customers, that
does not make it a contractor within the purview of section 191 of the
national Internal Revenue Code. there are no less than fifty
occupations enumerated in the aforesaid section of the national
Internal Revenue Code subject to percentage tax and after reading
carefully each and every one of them, we cannot find under which the
business of manufacturing sash, doors and windows upon special
order of customers fall under the category of "road, building,
navigation, artesian well, water workers and other construction work
contractors" are those who alter or repair buildings, structures, streets,
`Page 102 of 113
because it also sold the materials. The truth of the matter is that it sold
materials ordinarily manufactured by it sash, panels, mouldings
to Teodoro & Co., although in such form or combination as suited the
fancy of the purchaser. Such new form does not divest the Oriental
Sash Factory of its character as manufacturer. Neither does it take the
transaction out of the category of sales under Article 1467 above
quoted, because although the Factory does not, in the ordinary course
of its business, manufacture and keep on stock doors of the kind sold
to Teodoro, it could stock and/or probably had in stock the sash,
mouldings and panels it used therefor (some of them at least).
In our opinion when this Factory accepts a job that requires the use of
extraordinary or additional equipment, or involves services not
generally performed by it-it thereby contracts for a piece of work
filing special orders within the meaning of Article 1467. The orders
herein exhibited were not shown to be special. They were merely
orders for work nothing is shown to call them special requiring
extraordinary service of the factory.
The thought occurs to us that if, as alleged-all the work of appellant is
only to fill orders previously made, such orders should not be
called special work, but regular work. Would a factory do business
performing only special, extraordinary or peculiar merchandise?
Anyway, supposing for the moment that the transactions were not
sales, they were neither lease of services nor contract jobs by a
contractor. But as the doors and windows had been admittedly
"manufactured" by the Oriental Sash Factory, such transactions could
be, and should be taxed as "transfers" thereof under section 186 of the
National Revenue Code.
The appealed decision is consequently affirmed. So ordered.
It is at once apparent that the Oriental Sash Factory did not merely
sell its services to Don Toribio Teodoro & Co. (To take one instance)
`Page 104 of 113
INCHAUSTI
AND
CO., plaintiff-appellant,
vs.
ELLIS CROMWELL, Collector of Internal Revenue, defendantappellee.
Haussermann,
Cohn
&
Fisher,
Acting Attorney-General Harvey, for appellee.
for
appellant.
MORELAND, J.:
This is an appeal by the plaintiff from a judgment of the Court of First
Instance of the city of Manila, the Hon. Simplicio del Rosario
presiding, dismissing the complaint upon the merits after trial,
without costs.
The facts presented to this court are agreed upon by both parties,
consisting, in so far as they are material to a decision of the case, in
the following:
III. That the plaintiff firm for many years past has been and now is
engaged in the business of buying and selling at wholesale hemp,
both for its own account and on commission.
IV. That it is customary to sell hemp in bales which are made by
compressing the loose fiber by means of presses, covering two sides
of the bale with matting, and fastening it by means of strips of rattan;
that the operation of bailing hemp is designated among merchants by
the word "prensaje."
V. That in all sales of hemp by the plaintiff firm, whether for its own
account or on commission for others, the price is quoted to the buyer
at so much per picul, no mention being made of bailing; but with the
decided said appeal, and refused and still refuses to return to plaintiff
the said sum of P1,370.68 or any part thereof.1awphil.net
XIV. Upon the facts above set forth t is contended by the plaintiff that
the tax of P1,370.68 assessed by the defendant upon the aggregate
sum of said charges made against said purchasers of hemp by the
plaintiff during the period in question, under the denomination of
"prensaje" as aforesaid, namely, P411,204.35, is illegal upon the
ground that the said charge does not constitute a part of the selling
price of the hemp, but is a charge made for the service of baling the
hemp, and that the plaintiff firm is therefore entitled to recover of the
defendant the said sum of P1,370.68 paid to him under protest,
together with all interest thereon at the legal rate since payment, and
the costs of this action.
Upon the facts above stated it is the contention of the defendant that
the said charge made under the denomination of "prensaje" is in truth
and in fact a part of the gross value of the hemp sold and of its actual
selling price, and that therefore the tax imposed by section 139 of Act
No. 1189 lawfully accrued on said sums, that the collection thereof
was lawfully and properly made and that therefore the plaintiff is not
entitled to recover back said sum or any part thereof; and that the
defendant should have judgment against plaintiff for his costs.
Under these facts we are of the opinion that the judgment of the court
below was right. It is one of the stipulations in the statement of facts
that it is customary to sell hemp in bales, and that the price quoted in
the market for hemp per picul is the price for the hemp baled. The fact
is that among large dealers like the plaintiff in this case it is practically
impossible to handle hemp without its being baled, and it is admitted
by the statement of facts, as well as demonstrated by the documentary
proof introduced in the case, that if the plaintiff sold a quality of
hemp it would be the under standing, without words, that such hemp
`Page 106 of 113
order of the party desiring to acquire it, or a thing which would have
existed and been the subject of sale to some other person, even if the
order had not been given. (Groves vs. Buck, 3 Maule & S., 178;
Towers vs. Osborne, 1 Strange, 506; Benjamin on Sales, 90.) It is clear
that in the case at bar the hemp was in existence in baled form before
the agreements of sale were made, or, at least, would have been in
existence even if none of the individual sales here in question had
been consummated. It would have been baled, nevertheless, for sale
to someone else, since, according to the agreed statement of facts, it is
customary to sell hemp in bales. When a person stipulates for the
future sale of articles which he is habitually making, and which at the
time are not made or finished, it is essentially a contract of sale and
not a contract for labor. It is otherwise when the article is made
pursuant to agreement. (Lamb vs. Crafts, 12 Met., 353;
Smith vs. N.Y.C. Ry. Co., 4 Keyes, 180; Benjamin on Sales, 98.) Where
labor is employed on the materials of the seller he can not maintain an
action for work and labor. (Atkinson vs. Bell, 8 Barn. & C., 277;
Lee vs. Griffin, 30 L.J.N. S.Q.B., 252; Prescott vs. Locke, 51 N.H., 94.) If
the article ordered by the purchaser is exactly such as the plaintiff
makes and keeps on hand for sale to anyone, and no change or
modification of it is made at the defendant's request, it is a contract of
sale, even though it may be entirely made after, and in consequence
of, the defendant's order for it. (Garbutt s. Watson, 5 Barn. & Ald.,
613; Gardner vs. Joy, 9 Met., 177; Lamb vs. Crafts, 12 Met., 353;
Waterman vs. Meigs, 4 Cush., 497., Clark vs. Nichols, 107 Mass., 547;
May vs. Ward, 134 Mass., 127; Abbottvs. Gilchrist, 38 Me., 260;
Crocket vs. Scribner, 64 Me., 105; Pitkin vs. Noyes, 48 N. H., 294;
Prescott vs. Locke, 51 N. H., 94; Ellison vs. Brigham, 38 Vt., 64.) It has
been held in Massachusetts that a contract to make is a contract of sale
if the article ordered is already substantially in existence at the time of
the order and merely requires some alteration, modification, or
adoption to the buyer's wishes or purposes. (Mixer vs. Howarth, 21
`Page 107 of 113
Pick., 205.) It is also held in that state that a contract for the sale of an
article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is
on hand at the time or not, is a contract for the sale of goods to which
the statute of frauds applies. But if the goods are to be manufactured
especially for the purchaser and upon his special order, and not for
the general market, the case is not within the statute.
(Goddard vs. Binney, 115 Mass., 450.)
It is clear to our minds that in the case at bar the baling was
performed for the general market and was not something done by
plaintiff which was a result of any peculiar wording of the particular
contract between him and his vendee. It is undoubted that the
plaintiff prepared his hemp for the general market. This would be
necessary. One whose exposes goods for sale in the market must have
them in marketable form. The hemp in question would not have been
in that condition if it had not been baled. the baling, therefore, was
nothing peculiar to the contract between the plaintiff and his vendee.
It was precisely the same contract that was made by every other seller
of hemp, engaged as was the plaintiff, and resulted simply in the
transfer of title to goods already prepared for the general market. The
method of bookkeeping and form of the account rendered is not
controlling as to the nature of the contract made. It is conceded in the
case tat a separate entry and charge would have been made for the
baling even if the plaintiff had not been the one who baled the hemp
but, instead, had received it already baled from his vendor. This
indicates of necessity tat the mere fact of entering a separate item for
the baling of the hemp is formal rather than essential and in no sense
indicates in this case the real transaction between the parties. It is
undisputable that, if the plaintiff had brought the hemp in question
already baled, and that was the hemp the sale which formed the
subject of this controversy, then the plaintiff would have performed
no service for his vendee and could not, therefore, lawfully charge for
FIRST DIVISION
[G. R. No. 130972. January 23, 2002]
The Facts
The facts, as found by the Court of Appeals, are as follows:
SO ORDERED.[3]
`Page 110 of 113
Thus, the suit for sum of money, wherein the plaintiff prays that
defendants solidarily pay plaintiff as of July 31, 1992 the sum of (a)
P16,484,994.12 as principal obligation under the two promissory notes
Nos. 003 and 00037, plus interests and penalties: (b) P300,000.00 for
loss of good will and good business reputation: (c) attorneys fees
amounting to P100,000.00 as acceptance fee and a sum equivalent to
10% of the collectible amount, and P500.00 as appearance fee; (d)
P200,000.00 as litigation expenses; (e) exemplary damages in an
amount to be awarded at the courts discretion; and (f) the costs.
obligation
or indebtedness
of
defendants
4. Declaring the writ of attachment issued in this case null and void
and, therefore, is hereby declared dissolved; and
17.A. Sale of the nine (9) units passenger buses the proceeds of which
will be credited against the loan amount as full payment thereof; or in
the alternative.
17.B. Plaintiff will shoulder and bear the cost of rehabilitating the
buses, with the amount thereof to be included in the total obligation
of defendant Lawin and the bus operated, with the earnings thereof to
SO ORDERED.[5]
In time, respondent Advance Capital Corporation appealed from the
decision to the Court of Appeals.[6]
Article 1245 of the Civil Code provides that the law on sales shall
govern an agreement of dacion en pago. A contract of sale is
perfected at the moment there is a meeting of the minds of the parties
thereto upon the thing which is the object of the contract and upon
the price.[19] In Filinvest Credit Corporation v. Philippine Acetylene
Co., Inc., we said:
x x x. In dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of
payment of an outstanding obligation. The undertaking really
partakes in one sense of the nature of sale, that is, the creditor is really
buying the thing or property of the debtor, payment for which is to be
charged against the debtors debt. As such, the essential elements of a
contract of sale, namely, consent, object certain, and cause or
consideration must be present. In its modern concept, what actually
takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of the
contract of sale, while the debt is considered as the purchase price. In
any case, common consent is an essential prerequisite, be it sale or
novation, to have the effect of totally extinguishing the debt or
obligation.[20]
In this case, there was no meeting of the minds between the parties on
whether the loan of the petitioners would be extinguished by dacion
en pago. The petitioners anchor their claim solely on the testimony of
Marciano Tan that he proposed to extinguish petitioners obligation
by the surrender of the nine buses to the respondent acceded to as
shown by receipts its representative made.[21] However, the receipts
executed by respondents representative as proof of an agreement of
the parties that delivery of the buses to private respondent would
result in extinguishing petitioners obligation do not in any way
`Page 112 of 113
The Fallo
IN VIEW WHEREOF, the Court DENIES the petition and AFFIRMS
the decision of the Court of Appeals[23] with MODIFICATION as
follows:
WHEREFORE, the appealed decision is hereby REVERSED and SET
ASIDE. In lieu thereof, judgment is hereby rendered ordering
defendants-appellees to pay, jointly and severally, plaintiff-appellant
Advance Capital Corp. the following amounts:
(1) P16,484,994.42, the principal obligation under the two promissory
notes plus 12% per annum from the finality of this decision until fully
paid;
(2) P50,000.00 as attorneys fees;
(3) Costs of suit.
All other monetary awards are deleted.
SO ORDERED.
`Page 113 of 113